1. Economic Update December 2018 If you have any questions or comments,
please contact:
Steven Rick, Chief Economist
CUNA Mutual Group – Economics
, Ext

2. 5 Minute Federal Reserve Board Meeting

3. 5 Minute Federal Reserve Board Meeting
Federal Reserve’s Dual Mandate

4. 5 Minute Federal Reserve Board Meeting
Federal Reserve’s
Dual Mandate
Stables Prices

5. 5 Minute Federal Reserve Board Meeting
Federal Reserve’s
Dual Mandate
Stables Prices
Full Employment of Resources

6. 5 Minute Federal Reserve Board Meeting
Federal Reserve Critical Measures
Federal Reserve’s
Dual Mandate
Stables Prices
Full Employment of Resources

7. 5 Minute Federal Reserve Board Meeting
Federal Reserve Critical Measures
Federal Reserve’s
Dual Mandate
Stables Prices
Full Employment of Resources
Long-Run Equilibrium Goal
Actual

8. 5 Minute Federal Reserve Board Meeting
Federal Reserve Critical Measures
Federal Reserve’s
Dual Mandate
Stables Prices
Full Employment of Resources
Long-Run Equilibrium Goal
Actual
Inflation Rate 2%
2.0%

10. 5 Minute Federal Reserve Board Meeting
Federal Reserve Critical Measures
Federal Reserve’s
Dual Mandate
Stables Prices
Full Employment of Resources
Long-Run Equilibrium Goal
Actual
Inflation Rate 2%
2.0%
Unemployment Rate 5%
3.7%

11. Labor Market Beyond Full Employment

12. Labor Market Beyond Full Employment

13. Labor Market Beyond Full Employment

14. Improving Credit Quality As Unemployment Falls

15. 5 Minute Federal Reserve Board Meeting
Federal Reserve Critical Measures
Federal Reserve’s
Dual Mandate
Stables Prices
Full Employment of Resources
Long-Run Equilibrium Goal
Actual
Inflation Rate 2%
2.0%
Unemployment Rate 5%
3.7%
Economic Output Gap 0%
1.0%

16. Positive GDP Output Gap in 2018
With the Economy Moving Above its Potential Level of Output

17. Positive GDP Output Gap in 2018
With the Economy Moving Above its Potential Level of Output

18. 5 Minute Federal Reserve Board Meeting
Federal Reserve Critical Measures
Federal Reserve’s
Dual Mandate
Stables Prices
Full Employment of Resources
Long-Run Equilibrium Goal
Actual
Inflation Rate 2%
2.0%
Unemployment Rate 5%
3.7%
Economic Output Gap 0%
1.0%
Fed Funds Interest Rate 3%
2.18%

19. Positive GDP Output Gap in 2018
With the Economy Moving Above its Potential Level of Output

20. 5 Minute Federal Reserve Board Meeting
Federal Reserve Critical Measures
Federal Reserve’s
Dual Mandate
Stables Prices
Full Employment of Resources
Long-Run Equilibrium Goal
Actual
Inflation Rate 2%
2.0%
Unemployment Rate 5%
3.7%
Economic Output Gap 0%
1.0%
Fed Funds Interest Rate 3%
2.18%
10-Year Treasury Rate 4%
3.25%

21. Examples of some early data experiments that could benefit CUs:
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

22. CD and MMA Interest Rates Poised to Rise in 2019

23. Examples of some early data experiments that could benefit CUs:
Rising Long-term Interest Rates in 2018:
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

24. Examples of some early data experiments that could benefit CUs:
Rising Long-term Interest Rates in 2018:
 U.S. inflation ( Poil,  Wages)
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

25. Examples of some early data experiments that could benefit CUs:
Rising Long-term Interest Rates in 2018:
 U.S. inflation ( Poil,  Wages)
Fiscal Package (more inflation than growth)
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

26. Examples of some early data experiments that could benefit CUs:
Rising Long-term Interest Rates in 2018:
 U.S. inflation ( Poil,  Wages)
Fiscal Package (more inflation than growth)
Federal Reserve shrinking balance sheet
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

27. Examples of some early data experiments that could benefit CUs:
Rising Long-term Interest Rates in 2018:
 U.S. inflation ( Poil,  Wages)
Fiscal Package (more inflation than growth)
Federal Reserve shrinking balance sheet
ECB exiting QE
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

28. Examples of some early data experiments that could benefit CUs:
Rising Deficits
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

29. What causes Recessions?

30. What causes Recessions?
Necessary condition: Overheating economy:

31. What causes Recessions?
Necessary condition: Overheating economy: Tight labor market =>  wages & prices

32. What causes Recessions?
Necessary condition: Overheating economy: Tight labor market =>  wages & prices
Financial imbalances or excesses => bursting asset bubbles

33. What causes Recessions?
Necessary condition: Overheating economy: Tight labor market =>  wages & prices
Financial imbalances or excesses => bursting asset bubbles
(2001 stock market, 2008 housing market)

34. What causes Recessions?
Necessary condition: Overheating economy: Tight labor market =>  wages & prices
Financial imbalances or excesses => bursting asset bubbles
(2001 stock market, 2008 housing market)
Exogenous/External Shocks

35. What causes Recessions?
Necessary condition: Overheating economy: Tight labor market =>  wages & prices
Financial imbalances or excesses => bursting asset bubbles
(2001 stock market, 2008 housing market)
Exogenous/External Shocks (terrorist attack, war, trade war)

36. What causes Recessions?
Necessary condition: Overheating economy: Tight labor market =>  wages & prices
Financial imbalances or excesses => bursting asset bubbles
(2001 stock market, 2008 housing market)
Exogenous/External Shocks (terrorist attack, war, trade war)
High inflation => Excessive monetary policy tightening

37. What causes Recessions?
Necessary condition: Overheating economy: Tight labor market =>  wages & prices
Financial imbalances or excesses => bursting asset bubbles
(2001 stock market, 2008 housing market)
Exogenous/External Shocks (terrorist attack, war, trade war)
High inflation => Excessive monetary policy tightening
High Inventories => inventory correction

38. Stronger Economic Growth in 2018, around 3.0%, and 2.3% in 2019%
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

39. Examples of some early data experiments that could benefit CUs:
Recessions occur where there is too little spending to keep an economy’s resources from falling idle.
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

40. Examples of some early data experiments that could benefit CUs:
Recessions occur where there is too little spending to keep an economy’s resources from falling idle.
Six Factors Pointing to a Recession in 2020.
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

41. Examples of some early data experiments that could benefit CUs:
Recessions occur where there is too little spending to keep an economy’s resources from falling idle.
Six Factors Pointing to a Recession in 2020.
The credit cycle drives the business cycle.
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

42. Examples of some early data experiments that could benefit CUs:
Recessions occur where there is too little spending to keep an economy’s resources from falling idle.
Six Factors Pointing to a Recession in 2020.
The credit cycle drives the business cycle.
The recent fiscal stimulus in the form of government spending and tax cuts will fade in 2020.
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

43. Examples of some early data experiments that could benefit CUs:
Recessions occur where there is too little spending to keep an economy’s resources from falling idle.
Six Factors Pointing to a Recession in 2020.
The credit cycle drives the business cycle.
The recent fiscal stimulus in the form of government spending and tax cuts will fade in 2020.
The Federal Reserve raising interest rates 1 percentage point by 2020, reducing borrowing.
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

44. Examples of some early data experiments that could benefit CUs:
Recessions occur where there is too little spending to keep an economy’s resources from falling idle.
Six Factors Pointing to a Recession in 2020.
The credit cycle drives the business cycle.
The recent fiscal stimulus in the form of government spending and tax cuts will fade in 2020.
The Federal Reserve raising interest rates 1 percentage point by 2020, reducing borrowing.
Rising interest rates and a stronger dollar will decrease export growth.
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

45. Examples of some early data experiments that could benefit CUs:
Recessions occur where there is too little spending to keep an economy’s resources from falling idle.
Six Factors Pointing to a Recession in 2020.
The credit cycle drives the business cycle.
The recent fiscal stimulus in the form of government spending and tax cuts will fade in 2020.
The Federal Reserve raising interest rates 1 percentage point by 2020, reducing borrowing.
Rising interest rates and a stronger dollar will decrease export growth.
Trade wars and tariffs are reducing world trade, which historically is a precursor to a recession.
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

46. Examples of some early data experiments that could benefit CUs:
Recessions occur where there is too little spending to keep an economy’s resources from falling idle.
Six Factors Pointing to a Recession in 2020.
The credit cycle drives the business cycle.
The recent fiscal stimulus in the form of government spending and tax cuts will fade in 2020.
The Federal Reserve raising interest rates 1 percentage point by 2020, reducing borrowing.
Rising interest rates and a stronger dollar will decrease export growth.
Trade wars and tariffs are reducing world trade, which historically is a precursor to a recession.
Recessions typically begin 2 ½ years after the economy begins to overheat.
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

47. Vehicle Sales over17 million in 2018
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

48. Home Sales will Accelerate to 5.5 million in 2018
Currently making significant investments in data & analytics infrastructure. Some insights generated through this expanded capability will be shared with CU customers.
Examples of some early data experiments that could benefit CUs:
Loan generation – can credit bureau data be used to drive incremental lending on behalf of credit unions
Claims processing – how do we increase straight-through claims processing to solve member problems, increase CU loyalty and reduce operating costs

49. The Dollar is Rising

50. Oil Prices are Falling

51. High Stock Prices Producing “Wealth Effect” among High-Income Households

52. High Stock Prices Producing “Wealth Effect” among High-Income Households

53. High Stock Prices Producing “Wealth Effect” among High-Income Households

55. Home Prices will Rise 6% in 2018

56. Household Financial Assets are Rising

57. Non-Financial Assets are Rising

58. Household Balance Sheets Are Healing

59. Household Balance Sheets Are Healing

60. Confidence at 17 year Highs

61. Confidence at 17 year Highs
December 2000

62. Optimism:

63. Optimism:
sustained low gas prices

64. Optimism:
sustained low gas prices
low interest rates

65. Optimism: sustained low gas prices low interest rates
low retail inflation

66. Optimism: sustained low gas prices low interest rates
low retail inflation
rising stock and home prices

67. Optimism: sustained low gas prices low interest rates
low retail inflation
rising stock and home prices
labor market at full employment & rising job openings

68. Optimism: sustained low gas prices low interest rates
low retail inflation
rising stock and home prices
labor market at full employment & rising job openings
low debt burdens

69. Optimism: sustained low gas prices low interest rates
low retail inflation
rising stock and home prices
labor market at full employment & rising job openings
low debt burdens
improving credit availability

70. Optimism: sustained low gas prices low interest rates
low retail inflation
rising stock and home prices
labor market at full employment & rising job openings
low debt burdens
improving credit availability
tax cuts.

71. Pessimism:

72. Pessimism:
worries over pace of job growth

73. Pessimism: worries over pace of job growth
political uncertainty, dysfunction and gridlock

74. Pessimism: worries over pace of job growth
political uncertainty, dysfunction and gridlock
slow wage growth

75. Pessimism: worries over pace of job growth
political uncertainty, dysfunction and gridlock
slow wage growth
fears of financial market bubbles (i.e. non investment grade corporate bond market)

76. Pessimism: worries over pace of job growth
political uncertainty, dysfunction and gridlock
slow wage growth
fears of financial market bubbles (i.e. non investment grade corporate bond market)
Trade war rhetoric

77. Pessimism: worries over pace of job growth
political uncertainty, dysfunction and gridlock
slow wage growth
fears of financial market bubbles (i.e. non investment grade corporate bond market)
Trade war rhetoric
Real war rhetoric

78. When is the Next Recession?

80. Borrowing
future
income for
current
consumption

81. Borrowing
future
income for
current
consumption
Saving
current
income for
future
consumption

84. Banks have always depended On a rate of borrowing that is splendid
Limerick of the Day
Banks have always depended
On a rate of borrowing that is splendid
By consumers for whom
Their means to consume
May soon find them overextended.

85. Questions?

86. The End